Mark Carney Unveils Bold First Budget Amid Economic Challenges in Canada

Tue Nov 04 2025 20:27:53 GMT+0200 (Eastern European Standard Time)

Canadian Prime Minister Mark Carney is set to announce a transformative federal budget, warning of necessary sacrifices to bolster the economy impacted by U.S. tariffs.

In his upcoming budget, Prime Minister Mark Carney promises significant cuts paired with generational investments aimed at revitalizing Canada's economy, which has been hit hard by U.S. tariffs. The budget will address a projected federal deficit exceeding C$70 billion. Carney's strategy includes ambitions to double non-U.S. exports within the next decade while balancing day-to-day spending over the next three years. Political dynamics surrounding the budget's passage are complex, as the Liberals seek support in a minority government.

Prime Minister Mark Carney is set to present his government's first federal budget on Tuesday, and has warned Canadians to expect sacrifices as he aims to transform an economy battered by US President Donald Trump's tariffs.

Carney has said the spending plan will see both significant cuts and generational investments to strengthen the economy and reduce the country's reliance on US trade.

The plan is also expected to lay out how Canada will pay for billions of dollars in defence spending to fulfil the new Nato commitment to spend 5% of GDP on defence by 2035.

Analysts have suggested the federal deficit could exceed C$70bn ($50bn; £38bn), up from $51.7bn last year.

The fiscal plan is seen as a major test for Carney, a former central banker for Canada and the UK who has promised to make Canada's economy the strongest in the G7 group of wealthy nations.

We used to take big, bold risks in this country. It is time to swing for the fences again, he said in a pre-budget speech last month.

Canada, which trades primarily with the US, has a particular exposure to tariff shocks.

Carney has said he is setting a goal for the country to double its non-US exports in the next decade.

Joy Nott, a partner at KPMG Canada who focuses on trade and customs, told the BBC that Canadian companies need government support during the transition of moving from one market to another. This includes everything from finding money to travel on trade missions abroad to market research and navigating regulatory approvals when entering new markets.

Finance Minister Francois-Philippe Champagne underscored the made-at-home message on Monday as he bought new shoes - a political pre-budget tradition for federal finance ministers - at a Quebec business that supplies footwear worldwide as well as to Canada's armed forces and RCMP officers.

While he said the budget would be focused on investments, Carney has also promised to balance the federal operating budget - day-to-day spending on government programmes - over the next three years.

Carney's Liberal Party, however, faces challenges in passing the budget as they require support from other parties, navigating a complex political landscape in a minority government.

Should the budget vote fail, it could trigger a potential snap election, although analysts suggest this is unlikely given the timing.